By Amrith Ramkumar
Oil prices slid Thursday, paring nearly all of their weekly rebound as traders weighed signs that fuel demand and economic activity could fall even more than feared due to the coronavirus.
U.S. crude-oil futures fell 7.7% to $22.60 a barrel on the New York Mercantile Exchange, dropping back toward the 18-year low they hit last week and extending a stretch of extreme volatility. Prices are down 63% for the year, slammed by an unprecedented decline in fuel consumption globally and a price war between Saudi Arabia and Russia that threatens to increase supply.
Brent crude, the global gauge of oil prices, dropped 3.8% to $26.34 a barrel on the Intercontinental Exchange.
Oil had risen alongside stocks earlier in the week, with investors anticipating the largest economic stimulus package in recent memory in the U.S. The Senate has approved the package, moving the estimated $2 trillion bill designed to support consumers and businesses to the House of Representatives.
Still, many analysts don't think the provisions will be enough to shield the economy from the virus, with cities across the country essentially shut down. In oil's case, a halt to global travel has resulted in a historic drop in demand.
Traders were also weighing figures showing a record 3.28 million workers applied for unemployment benefits last week in the U.S., the latest sign of the economic damage facing oil traders and companies around the world.
"A demand shock of this magnitude will overwhelm any supply response," Goldman Sachs analysts said in a recent note to clients.
Many analysts expect supply to far exceed demand in the months ahead, with the gap between the two even larger after the Organization of the Petroleum Exporting Countries and allies including Russia weren't able to reach a deal to deepen existing supply cuts earlier this month. Saudi Arabia, the de facto leader of OPEC, then launched a price war by telling buyers that it was slashing prices and that it plans to increase output.
The U.S. plans to press Saudi Arabia to restrain its scheduled oil-production boost as leaders from the Group of 20 major economies convene by videoconference on Thursday, The Wall Street Journal reported. In addition to possible intervention by the Trump administration in the price war, The Journal has reported that Texas regulators are weighing whether to curtail crude production for the first time in decades.
Still, many analysts are skeptical such measures will be enough to help prices stabilize unless supply starts falling by millions of barrels a day globally.
Elsewhere in commodities Thursday, front-month gold futures rose 1.1% to $1,650.10 a troy ounce, climbing back toward a seven-year high with investors favoring safe-haven assets that can hold their value during times of turmoil. Shortages of physical metal have also supported gold prices with mines and refineries shut down globally and transportation routes to move bars and coins limited.
Write to Amrith Ramkumar at firstname.lastname@example.org
(END) Dow Jones Newswires
March 26, 2020 15:23 ET (19:23 GMT)
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